Policies utilizing tactical inventory for service-differentiated customers

Authors:
Serhan Duran;Tieming Liu;David Simchi-Levi;Julie L. Swann
Affiliations:
Industrial Engineering Department, Middle East Technical University, Turkey;School of Industrial Engineering and Management, Oklahoma State University, USA;Department of Civil and Environmental Engineering and the Engineering Systems Division, MIT, USA;H. Milton Stewart School of Industrial and Systems Engineering, Georgia Institute of Technology, USA
Venue:
Operations Research Letters
Year:
2008

Citing 6
Cited 5

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Policies utilizing tactical inventory for service-differentiated customers

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A heuristic for rationing inventory in two demand classes with backlog costs and a service constraint

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Abstract

We consider a manufacturer serving two customer classes where one wants the item immediately and the second receives a discount to accept a delay. We show that an (S,R,B) base-stock policy is optimal under differentiation and non-differentiation where S, R, and B are the order-up-to, reserve-up-to, and backlog-up-to amounts.